China warning ignored by bond buyers

Hong Kong

WHAT happens when you say that you have taken away a safety net, but nobody believes you?

That is essentially what is going on in one corner of China's bond market, with the implication being that someone needs to get hurt before the message hits home. The issue relates to local government financing vehicles, or LGFVs, which boomed a decade ago when China's communist leadership let provincial and municipal authorities ramp up borrowing to fund all sorts of infrastructure and property development.